Tax reform “poster boy” tells foreign chamber: Warning of job loss under Citira “suspicious”

by Ben O. de Vera, Philippine Daily Inquirer, 30 Sep 2019

The chief lobbyist and so-called “poster boy” of the Duterte administration’s comprehensive tax reform program on Monday, Sept. 30, challenged a group of foreign businessmen in the Philippines to prove its claim that 700,000 jobs would be lost if tax incentives were revised as part of the proposed Corporate Income Tax and Incentives Rationalization Act (Citira).

“Our numbers are transparent,” said Finance Undersecretary Karl Kendrick T. Chua in a statement.

He said Citira, which would lower corporate income tax from 30 to 20 percent, was likely to propel companies to “reasonably invest at least 50 percent of their additional money” from the lower taxes.

“This will mean more jobs—a total of 1.5 million jobs actually,” Chua said in a statement.

He said Citira features a “new menu of incentives for investors” that would lead to “job creation and upskilling.”

Citira will gradually reduce the income tax rate being slapped on firms to 20 percent from the current 30 percent, which is the highest among countries in the Association of Southeast Asian Nations (Asean).

It also sought to review current tax perks being enjoyed by investors with the objective of cutting government revenue loss.

Chua was reacting to claims by Joint Foreign Chambers of the Philippines (JFC), which last week warned the Senate that if the review of tax incentives led to their removal, 121,000 direct and 582,000 jobs would be lost in the first year of Citira’s implementation alone.

“Citira destroys a highly successful incentives system,” said John Forbes, American Chamber of Commerce senior advisor, who represented JFC at the Senate.

He said the Department of Finance “has been silent on the jobs that will be lost.” “We are not,” Forbes told senators.

“We hear them. We have been listening to them,” said Chua.

He said the DOF has been asking the foreign businessmen “in almost every meeting for two years now” to provide details of the kind of jobs that would be lost because of Citira “in which industries and in which areas of the country so we can help.”

Chua cited the support of Trade Secretary Ramon Lopez, which is crucial because Lopez chairs both the Philippine Economic Zone Authority (Peza) and Board of Investments, two government agencies dealing with tax incentives.

Lopez, said Chua, “already said that we are open to continue supporting footlose industries.” “So why won’t they give us more details of their claims? Their lack of transparency is a little suspicious, don’t you think?”

Chua said he also wanted to know if JFC had calculated the number of jobs that would be created if companies “are able to expand using the savings from a lower corporate income rate.”

He said foreign businessmen “currently receiving incentives” should also calculate “what they stand to gain from Citira.”

“We want to transform the incentive system to reward job creation,” Chua said.

“So I am not sure why the leaders of some foreign chambers want to keep the present system,” he said. Instead of rewarding profit, Chua said, what should be rewarded was business “behavior that directly benefits the Filipino people.”

“Creating jobs and ensuring that our citizens are prepared for the employment demands of the future are the highest priorities of this reform,” Chua added./TSB